Also called: DSCR, Debt service coverage ratio, Capacity
Serviceability
Serviceability is a lender's assessment of whether you can meet the proposed repayments from available income after existing commitments and expenses. For commercial lending it is often measured as a debt service coverage ratio, comparing available earnings with total debt repayments.
What is a serviceability?
Serviceability is a lender's assessment of whether you can meet the proposed repayments from available income after existing commitments and expenses. For commercial lending it is often measured as a debt service coverage ratio, comparing available earnings with total debt repayments.
Example
A business with $180,000 of available earnings and $120,000 of annual loan repayments has a DSCR of 1.5, comfortably above a typical 1.25 minimum.
Why it matters
It is usually the deciding test on larger commercial deals — security alone will not carry an application that cannot be serviced.